Westlake Corporation (WLK) Earnings Call Transcript & Summary

Welcome back. I'm sure people will keep filing in and out, but we -- keep the ball rolling here. And I'm very pleased to be joined by Steve Bender, the EVP and CFO of Westlake, Obviously, Steve recently announced his retirement pending the replacement and hiring process. So congratulations. I know you've been a Westlake CFO as long as I've been in the industry, which is an exceptionally long time, but longer in and itself the most CFO stint. So congratulations on the career.

Thank you very much.

I was remarking between like yourself and Vince and Allen Mistysyn. It's like a lot of -- the CFOs who I kind of came up to the industry are now departing. So it's a little bittersweet, but it's been good. You've always been like an incredibly helpful resource for us over time. And -- so thank you for that.

I appreciate those kind words.

Of course. So there's a few different things we can talk through, Steve, but I want to talk PVC, maybe to start. It's a business that, like historically has had a pretty small margin right, as it relates to the overall chlor-alkali component of it. How do we change that? And what we've seen from a global trade flow perspective is maybe a little bit more difficulty with China becoming a little bit more of an export presence, but what are you seeing on the ground there that might cause or change any shifts because anti-involution is taking different terms and different VAT systems are changing. So can we give a little bit of sense on the market for PVC and where you would think it goes?

Yes. The market really is fundamentally changing, I think, with the -- and when you have kind of pulled back a little bit and say, China was really self-sufficient in PVC, they imported some, they exported some. But on balance, they were actually self-sufficient. With the slowdown in construction activities in China and actually, as everybody is aware, they started exporting, but China sits very high on the cost curve. So their exports were generating actually cash losses. They were actually exporting below their own variable cost. Not a very good business model. And so when you think about what they've started to do here with our anti-involution efforts and also the repeal of their duties, they're allowing therefore people to become more rationally oriented, which -- and again, just kind of level set everybody here on the revocation of their duties, what they were saying is you got that 13% duty drawback if you exported. Effective April 1, they're no longer going to provide that duty drawback to those exporters producing in China and exporting overseas. So what you've already seen well in advance of April 1 is export prices rising. And as a consequence, many of those producers -- in fact, all those producers were losing money because they said they're producing below their own variable cost. For many of those, that 13% duty drawback was the only profit they expected to see and now that they're losing that, still producing below variable cost, their losses are going to continue to grow. So when you think about who's financing those losses, it's provincial in regional banks within China. If you think back -- going back to history here, going back to 2005, we saw similar behavior by the Chinese vinyl producers. At some point in time, those loans are going to have to be recapitalized for the banks because these loans are not going to get prepaid. So what happened in 2005 and '06, the Central Bank of China, Bank of China stepped in and had to recapitalize those provincial banks. So therefore, they cut off lending to those nonprofitable operations. I fully expect to see that begin to materialize here because none of those loans being funding those unprofitable operations by those regional players in China are never going to get repaid. And so it's going to create not only a problem for the producers, but also for those regional and provincial banks in China. So I think the first step of this effort is that revocation of that duty. You've also seen anti-involution, which is shuttering some of those nonintegrated PVC sites. China has a proliferation of inland-based nonintegrated PVC operations and when you think about what's happened over the course of time, you've seen those operations be surrounded by residential construction. We have a plant that we just shut down last year. It was a nonintegrated PVC site that had completely been surrounded by residential construction over the nearly 30 years that plant have been operating. So when we shut that plant down, we are permitted by statute to run that plant in an idle mode for up to 2 years. Within 2 months, they walked in and revoked our air and water permits. Sure, we can reapply, but trying to get that air and water permit might be a real challenge. So what you see them doing is pulling back where they can on nonintegrated operations and trying to then pull those operations to the coast and tie in those production into refining and other chemical operations at the coast. So I do expect to see a slow sunset of nonintegrated PVC producers that are not on the coast and tying those back to operations that are integrated with refining and chemical operations. That will take many years, but I think that effort is underway.

So as we look at your expectations or what we could expect to see as a result of the VAT removal, right. You have this April deadline is the view that we're actually seeing a lot more exports right now ahead of that? Or has that kind of become a guidepost and people are starting to raise price now? And then by April, the price goes up more, how is the market responding itself to the development.

Yes, the market are responding very quickly when the authority has announced the removal of that drawback. So export prices have already started to rise. And it's not going to be a surprise to, I think, many certainly not in the industry, that we're going to see an inversion where export prices will maybe exceed domestic prices for resident, which is why you're seeing costs begin to rise and you saw natural gas prices rise, ethane prices rise and ethylene rise over the last several months. As we all know, it's been very cold in the Midwest and the Northeast. Gas prices shot up and they have come back down, but you still see an elevated cost. So you've seen domestic producers raise prices and nominate prices, not only in January, February and some in March. But the export prices continue to rise, and as we see that continue to rise in advance of the April 1 date, I think you're going to see more rational production come into play because you already see in Europe, a number of vinyl producers who have shuttered operations. You've got a handful of producers in Europe who are also in bankruptcy right now. So I think you see a number of actions, whether it is China becoming a little bit more financially rational operations in Europe who are being shuttered. We ourselves shuttered a number of -- we shuttered 3 core vinyl assets in December that were all export-oriented. So I think you see now the supply side beginning to react to the loss of profitability, which is beginning to balance that market. The vinyls market is much more balanced than we see from a supply/demand balance than the polyethylene markets. You've only got a small handful of players relatively in the vinyl space versus in the polyethylene space. So I think that market has a much likely chance to be balanced much sooner than the polyethylene space.

Well that gets back to my point a little bit, right? Because if we don't see much global capacity adds for chlor-alkali chain, PVC, caustic chlorine in and of itself. And I know people like to think of Westlake as a U.S. housing play, and that's certainly relevant for the building products. But you sell PVC domestically. But in reality, PVC is kind of an international business. We can't raise U.S. PVC prices unilaterally for an extended period of time outside of what we might see is global price. So how far are we away from you think seeing a backdrop where operating rates could warrant a better backdrop for margins for the vinyl chain.

I think we're beginning to see some of those, what I would say, and we're cautiously optimistic in our outlook. But I'd say, beginning to see some signs of improvement in that space. Rationalization of excess capacity, as I mentioned, is already happening, both in the Americas. We're part of that. It's happening in Europe, and you're seeing some actions in Asia. So I think you're beginning to see some actions on the supply side. Demand has always been very predictable in the vinyl space. It's, as you mentioned, large fleet construction related. And historically, for as long as I've been in this business, nearly 50 years. I would say that we've seen it grow very predictably at about 1x global GDP. So it's really a supply problem, not so much a demand problem. I wouldn't say that's the case in polyethylene quite now because you still have a lot of excess capacity being added. But I would say on the vinyls side, it's really an oversupply issue. As you see players begin to rationalize that excess capacity, you're going to see the market begin to recover sooner. So you're right, there's very little capacity being added in chlor-alkali and in PVC. So I expect to see that market begin to kind of return to profitability much sooner than I would see it in some of the other chains.

In that other chains, including polyethylene, too. polyethylene is profitable...

Polyethylene is profitable, but you still have very significant capacity being added in Asia, capacity being added in the Middle East and capacity being added in even in North America. So if you just look at some of the consultants that talk about capacity being added in Asia, you probably have 6 to 7 world scale plants being built between now and 2028 in Asia. You have several being built in the Middle East and at least 1 being added here in North America. So you can ask yourself in the course of the next 4 years, 3.5 years, do you have a need for 7 to 9 world-scale polyethylene plants? Probably not. So this is why the market and the consultants are saying the market is going to be oversupplied for a while. Now to plan in the polyethylene space as we are, we play in the more specialty end, not the commodity grades. So as you look at Westlake's position in polyethylene, our space is really more in the specialty end, it's the low density, high pressure, high clarity form of polyethylene, which has over 125 grades. In the more commoditized forms of high density and linear, you have roughly half a dozen grades or so each. And most of that production both in North America and the Middle East is destined for export. And if your export market is building its own capacity, where does that production go.

So I find myself often in the world where like CMA is increasingly the only like source for some of the stuff missing the days of Brian and Charlie. And Charlie probably shouldn't have said this when he did, but we got to ask Charlie where PVC would settle? He's like, I don't know, I haven't settled it yet, right? Like he took PVC was his baby. But when we see -- we track a lot of this data and like it feels like the PVC market is going unsettled for like very long periods of time, and maybe that's not the case in CMA is just off like what's happening there?

Well, I think that as we think about it as producers, when you think about just the North American market, there are only 4 producers really in the North American market. And frankly, to make sure that we're staying certainly within the boundaries, we don't necessarily publicize our prices. When you only got 4 producers, you're not going to get into publicizing prices. So you may have consultants who may say it hasn't been settled, but trust me, I'm billing and collecting on a [ group ] basis. And so when we talk about prices maybe not having been settled. In fact, they have been settled. It may not be transparent to necessarily all the parties that are not in that space, but prices have been settled. And so as we think about making sure that we stay within the boundaries of what is legally allowable that we're not signaling to other producers where there may only be 3 others and ourselves. We want to be very careful about what we're doing to stay within the legal bounds. In the polyethylene space since you have multiples of those 4 players globally operating in an environment that is not within the bounds of the United States, there's probably more transparency. And I would say in the domestic market, we have only 4 domestic producers. The answer is we are still operating and operating and settling on a regular basis. It just may not be as transparent to an outside reporter.

No, that's helpful because it's not, but it's fine. I want to talk about polyethylene.

And by the way, we settled up $0.01 in January and we've announced price increases in PVC for February and for March.

Just how far ahead of the domestic market is the international market right now?

It's evolving. I'd say export prices are moving up and because it is a largely spot-oriented market, I would expect that over the course of the first quarter, if, in fact, we continue to see the behavior to continue to develop, we could see what I would call an inverted market where export prices are higher than domestic prices. It's not there yet, but certainly possible because we continue to see a retraction of exports coming out of the Chinese market. It's possible with that, we could see further elevation of the export price.

Yes. So that's always been the indicator that I've looked for, for like the most durable price factor for PVC. On the polyethylene side, we just had August and Lyondell here, we're talking about polyethylene inventories. And we track the ACC data, pretty large reversion or cut basically made to the U.S. balance and I think it helps. Certainly, the argument for pricing in February and January, which we saw as being up. Westlake has made comments about wanting to run your assets hard as I believe, right, like that's the view on the polyethylene side of the equation. Dow has made similar comments. What's the puts and takes of running hard versus trying to balance things out? Because operating rates are high 80s for the U.S. right now. and were balanced -- like inventories are tight, but we can put inventories into oversupply domestically if we turn operating rates up as an industry. So is this Westlake taking your position maybe smaller than other peers and run full out and letting other people worry about balancing things? Or do you think this is a market that should -- everybody should be running for?

Well, this is a market that I think where product differentiation will really shine because when you think of the larger producers, be it CPChem, Exxon Chemical, Lyondell, Dow and many others, the answer is the great majority of their production is the commodity-based polyethylene, high density and linear low density, and they're big exporters in the markets. If you look at Westlake, the great, great majority of our production is in the specialty and it's low density, high-pressure polyethylene. So we're comparing apples to oranges when we talk about polyethylene more generally across those producers and across Westlake. So while we talk about operating rates in polyethylene generically, the reality is we're comparing 2 very different sets of properties of those products. So our properties are really going into largely consumer packaging and applications with high clarity. So think of the coating packaging applications, these are cardboard, potato chip bags, bread bags and such. So the applications you see many of our peers in and high density and linear through the trashcan liner. It's the rigid blown milk jug. It's that application. So we're competing in very different markets. So our product sets are quite different. So when we talk about operating rates in polyethylene generically, we're missing the big distinctions between these product categories. So in our case, we're not competing with them in that product set. We make a very small portion of our product sets that compete with them, but the great majority of our products don't. So when we think about our operating rates relative to theirs, we're really not comparing apples-to-apples in that context.

Okay. Fair enough. I don't typically think of Westlake making missteps on the acquisition front, but Hexion feels like one that probably felt great at the time considering the multiple. And even in that, I think you knew it was past peak. But one, can you walk me through the decision to close Pernis. And then two, what do you learn from that West -- or for the Hexion deal?

I probably need to talk to the intelligence agencies a little bit closer than we do. We didn't see the innovation by Russia and Ukraine. And so we didn't see the termination of gas supply coming out of Russia into the European markets nor did we see the fact that when China would come out of COVID lockdown that most of their GDP would be tied to nondurables versus durables. And so as we thought about this acquisition, we closed just about a month before the invasion occurred. And so from a timing perspective, our timing was frankly very poor. And so what happened in our operations in Pernis Rotterdam was the fact that we saw a real spike and even the prices have come down, they stay very elevated in terms of feedstocks, power cost. So what has happened here with our operations in the Netherlands is a much higher cost of operations than we would have expected, plus with China coming at a lockdown out of COVID that production of epoxy that they -- we saw being built was largely designed to be consumed domestically. But because of the nondurable demand that they have largely in their economies, they're exporting that product because they don't have the domestic demand for that product today. So I feel sure they will. And so that product has been flooded into markets again into Europe. It's not really coming much into this market, but we are seeing product coming out of Korea into this market. So I would say that what we missed was really the spike in cost of energy and feedstocks. We also did not see that the economies in China would be from a durable markets perspective as weak as they have been and remain so. The growth in China's GDP is largely nondurable. And that's really where most of this epoxy would have been consumed. And until that migration of product goes from nondurable to durable, it won't pull back the epoxy out of the Western markets into -- back into Asia. So you're right, it was a call on both a business that we thought is long-term viable, but unfortunately, that asset, specifically in the Netherlands isn't. So we shuttered that asset in 2025. And we'd say, having now shuttered that asset, our epoxy business is profitable. It was just the lack of profitability of that operation in the Netherlands that was shielding the profitability of the rest of our epoxy business. So today, as I look forward with our epoxy business, it has been profitable since the shuttering of that Pernis asset and remains profitable to this day, and I expect it to continue to be profitable is just that the lack of profitability of that Pernis operation in Rotterdam overwhelm the profitability in the rest of the business.

And Europe is an interesting case study because it's like a half measure, right? We saw these antidumping duties on epoxy from China, but not South Korea, right? And so China maybe exited the European market and South Korea just moved directionally there. And so as you think about how Europe is taking steps to defend domestic industry like in your efforts, are you lobbying for this? Like has the conversation moved to a broader import, antidumping stance. Is there frustration around how ineffective some of these decisions can be? I don't know. It's a hard question, it's not really a great question to ask you, but I do wonder because it's as a region facing deindustrialization is more or less a dumping ground for a lot of commodities. So as Europe tries to come to some form of policy on industrial defense, like how are you seeing the steps form there?

I'd say Europe differs in terms of which state you may be discussing. And I'd say that the operations that we have in Germany, the operations we have in the Netherlands, the operations we have in France is different in terms of the dialogue, they don't all speak with the same common voice and so when you think about the conversations we had with the Dutch authorities as we approach thinking about shuttering that plant in Rotterdam, the Pernis, in the Netherlands, when you approach them and said between your environmental policies, which required us to invest truly hundreds of millions of dollars in the next few years in a business that was losing money and said, could we not think about some grace in terms of deferring those investments, at least until this business can afford making those capital investments and thinking about your trade policies that at least allow us to be playing on an even level playing field with those imports coming out of Asia that are being sold in the market below their own cost of production. And I would say the authorities in some countries, such as the Netherlands basically said we don't care. But I would say, in Germany, you get a very different answer. So I would say, in Germany, where we have operations as well, I would say there's probably a more favorable year. So as a recent example, some of the carbon credits that we see coming out of the EU for operations. The Germans have heavily influenced decisions by the EU and Germany is providing to industrial players free carbon credits, whereas I'd say, some countries lobbied against that. And so I would say that you get different voices depending on the footprint that you may have across Europe that varies much state by state by state. And so I would say that as an industrial player in some of these markets, you just have to be cognizant of how might you be competitive? And there is no doubt that we continue to be very engaged in dialogue to these countries and with the provincial and local authorities as well, of course. But you just have to be thoughtful about capital investments that you're going to be making now and in the future. And the policies can change on the fly. So you just have to be very thoughtful about that.

Okay. I appreciate that. So to move from Pernis to the Aberdeen, Lake Charles closures? Ultimately what's driving the decision there? Because if we think simplistically about America and lower end of the cost curve with cheaper U.S. gas, it is interesting to see the rationalization happening domestically here as well.

Yes. And so all the operations, and I should roll the clock back a little bit. In 2025, we shuttered 6 chemical plants in 2025. We showed in Pernis this operation in Rotterdam, we shuttered a nonintegrated facility in China, a PVC operation and shuttered 4 operations in the United States, 3 core alkali, core vinyls plants and a styrene plant. All 6 of those facilities were destined for export markets. And so therefore, it was clear to us that we needed to take those actions because all 6 of those plants were not generating positive value. So as we thought about those operations in Aberdeen or in Lake Charles, where we shuttered those core vinyl plants, it was clear to us that while we have a low-cost production, they're not physically integrated. We're having a lot of rail cost and shipment cost of products between sites and site all destined for a low-priced market. And so while we have a low cost of inputs, we're also selling those low cost of inputs into an even lower priced market. And as I mentioned earlier, we have many of the Chinese producers that are selling below their own variable cost. And if they're selling below their own variable cost, you're competing with a party that seemingly has no end in terms of how long they'll fund that. So we recognize that while these are low cost on a global basis, they were our higher-cost sites, so we felt we could go ahead and shutter these assets permanently remove that production out of the market, pull that out of the export markets still remain low-cost for the remaining footprint we have, run those existing assets we have at even higher operating rates, which spreads that fixed cost of production over more production. So from our perspective, it allowed us to extract ourselves from a low-priced negative margin business allow our domestic operations to actually raise their operating rates and become even more profitable.

So from like a net exit basis, right, because those assets probably weren't running at 100%, but maybe they were closer to 70%, 75% if they were in an unprofitable situation. And your domestic base was already running pretty well, but you could take it up. What's like the net loss through your network, if you were to look at like tons, pre and post those 6?

So we are then elevating operating rates because we are able to then service some of that market domestically with the higher operating rates of our domestic plants. So we're still in the export market, we didn't fully exit the export market in vinyl, but we exported -- we exited a significant portion of our business in the export market. The industry is exporting just under 40% of its PVC out of North America -- out of North America because we have our HIP building products business that takes a very significant portion of our PVC resin. We were substantially below that 40% number of the industry was exporting. And by pulling back on our PVC exports, now we're very significantly less than half of that export percentage today. So it allows us, therefore, to run those domestic assets at higher operating rates to meet market demands.

I wanted to talk about the balance sheet a little bit. So one of the effects of the cycle that we've seen pressure is cash flow. And cash flow, candidly, is not particularly robust right now. So what do you have as levers here? I mean the balance sheet is not in a bad position by any means. You've always been very conservative with how you run the business. But what are the priorities for cash over the next 2 years? Are there any real capital calls? What what should we expect from company-specific actions to improve the cash flow dynamics?

And so there are 3 specific discrete actions that we've been very clear in terms of what we're taking. We call it our 3-pillar strategy. The great majority of this is really on the PIM or the chemical side of the house. And so the first piece of that pillar is a cost reduction initiative, which is a $200 million structural change to our cost structure. Remembering, we achieved $170 million of cost reductions in 2025. So this $200 million sits on top of the $170 million we achieved in 2025. It's a very significant piece of self-help. The second piece of that pillar really is this footprint optimization we just talked about, where we've shuttered not only 6 chemical plants, but we've actually repositioned 3 other HIP plants over the course of 2025. That itself would also generate a $200 million savings itself. And then the third pillar really is running the plants on a more reliable basis. In '25 and in late '24, we had a very unusual level of planned turnarounds. We have moved a lot of these planned turnarounds out to '24 and '25 because during COVID, we didn't want to have all that kind of maintenance performed in '21 and '22. So we pushed these out several years in '24 and '25. As we undertook those planned outages, as we brought the plants up, we found putting some of that equipment under stress, temperature and heat caused some of these plants to stumble and go down again in an unplanned manner before they came back up. So '26 ought to be a more normalized turnaround year. So while everybody will have an unplanned outages, we expect that our unplanned outage number should be greatly, greatly reduced because the number of planned outages is greatly, greatly reduced. So we think that third pillar is also about a $200 million savings. So when we think about the savings that we have that are just pure self-help, putting markets aside. That $600 million of value we see being delivered to EBITDA in 2026. So just with setting the market aside, just the actions that we're taking, we think we'll achieve that. So 2 of those pillars, I would say, are deeply underway. So the first pillar of cost reductions, we actually negotiated all those last year, talking about logistics, procurement activities and manufacturing. So we've already negotiated rates. It's just a matter of run rate over the course of the year. So I fully expect that to be in pocket. In terms of those plants that were losing money last year, but we were all shuttered. So I don't expect those losses to reoccur. So that's really in pockets. So the third pillar is plant reliability. We have to earn that every day. So we'll watch as we go forward over the course of '26 to see is our reliability significantly a step-up from 2025 reliability. As I say, you have to earn that every year, every day, but we'll see how that plays through. But I'd say of those 3 pillars, 2 of those are really well in hand at this stage.

So I like to play a game sometimes called talk to me like I'm a fourth greater. I was looking at 4Q earnings, right? And we got walked down a bit because you had these assets that were idled and there was the unabsorbed fixed cost. And then earnings comes in much stronger. And you saw the GAAP costs on this. And I asked on the earnings call a little bit about -- sorry, I apologize for asking again, but...

I'll give you the same answer.

Yes. I'm ready for that. I just don't know how you found $80 million in like 3 weeks, right? And so for me, it feels like -- and this is fine if this is what it is, like creative accounting around adjustments or things like that. And it's not -- you said it's not. So the game of explain it to me like a 4-year-old. So I think that's -- the question we got and the pushback we got as well around that. And so I -- and as it relates then to next year, because you have these pillars, right? And you've talked about them, and they're all very tangible, we understand. And a lot of it is just the absence of cost, which is -- lends a lot of credibility to that. But if we've got this earnings now in 4Q, is that theoretically less growth for next year, and you seem to say no, but...

So the gap, and it depends on whether I'm trying to bridge to your estimate of The Street estimates, but what I would say is that in the last few weeks of the year, we monetized, annuitized a number of pension obligations that we had, and I had, frankly, a very pleasant surprise. It was about a $27 million pleasant surprise by further annuitizing some pension obligations that came that we didn't know where that was going to land until we got literally till the end of the year. But on top of that, I had a number of -- a large number of kind of one-timers. So when you add those small bits and pieces to that $27 million annuitization, that's $30 million, $35 million of onetime items that were in the fourth quarter, late in the fourth quarter. And then I would say that some of that additional bridge was, frankly, the fact that we weren't selling product in the last 2 weeks of the year, that we're losing money. These plants that we had shuttered that we announced on the 15th of December, I obviously couldn't tell the employees we were going to permanently shut these plants. We brought the plants down. We weren't selling product. We told the employees we're going to undertake an action on these plants, and they assumed it was a maintenance action back. In fact, it's the shutdown actions. So we had fixed cost but no sales. And those sales, as I mentioned, were being sold at or in some cases, below variable margin. So the additional loss that you incur by selling additional products is not incurred as well. So part of the bridge is really the annuitization, some pension obligations, some smaller items as well as the lack of losses related to those facilities that we shutted in December.

And I apologize for taking me this long to get to building products. It's comfortably consistent. And so I've been trying to spend time on the things that aren't, but it's been a very good stable anchor for the business, right? You're seeing some trends as it relates to trading down that's impacting your mix. But overall, the business remains pretty healthy. So what's the future of Westlake Building Products as we move through this down cycle and your cash flow gets better. Westlake's always been an acquiring company. So is -- should we expect more to be done in building products over time?

Of course. The answer is we closed on an acquisition just last month in our compounds business and I expect that we'll do more of that over time and fill out the portfolio. You think of our HIP business, the Housing and Infrastructure Products business. That HIP business really is a very nice business that is not capital-intensive like the Chemical business is. It is more stable and has a predictable organic growth rate that we've signaled as 5% to 6% to 7% a year, just organically. The acquisitions that we undertook in '21 and '22 have continued to add to that portfolio and give us a coast-to-coast footprint to be able to service the big nationwide homebuilders, the D.R. Hurton, Pulte, Lennar Homebuilders, KB Homes and many others. And we have a geographical footprint that services both Canadian and the U.S. market coast to coast. But nevertheless, there are some gaps in our portfolio that we'd like to fill out and product innovation at the same time to meet those customers' needs. So I do think that we'll look for opportunities to fill those gaps. You just have to recognize that sometimes those values on a multiple basis are higher than chemical trading multiple, we see oftentimes attributed to Westlake, which means I have to find compelling synergies to be able to buy down those -- that elevated multiple. And that will sometimes cause us to lose some of these opportunities because they won't pay that elevated price. Westlake is incredibly focused on value-add and EVA, economic value add. So I'm not going to stretch to pay an outsized multiple if I can't see a path to making that truly productive and profitable business. It doesn't mean we're ignoring the chemical side of the house. So we'll look at opportunities that are value added on both sides of the house and say, how can I improve the profitability, both on the HIP side on the PEM side and are there opportunities to fill out the portfolio geographically or by product set within HIP, Likewise on the PEM side, are there opportunities -- excuse me, opportunities to improve the overall portfolio to further integrate that business because profit does move back and forth across the chain. You mentioned earlier in your comments that PVC tends to have a low margin. I agree with you, historically, it has. But to be a producer of PVC, you have to produce ethylene, chlorine, caustic, VCM, EDC and [ vin PVC ]. So profit moves back and forth those chains on a regular basis. So if you don't occupy that entire space, you'll miss that. So we don't look at just the PVC space to be able to say where is the profitability you look across the integrated chain. So as we think about being able to fully integrate that chain, we'll continue to look for ways in which to do that, be it in this market or some of our overseas markets.

Look, we only have a few minutes left, right, but that kind of brings me to this nagging question that I've had. It's not your problem anymore. So that's fine because you're going to be gone, but...

I'm still a shareholder.

Look, for the next 5 years, if I see what's in the pipe, we're going to see net tightening to the ethylene market. To this point of integration, Westlake remains net short on its ethylene position. clearly, we have favorable dynamics in the U.S. as it relates to ethane. But also it's expensive to build a plant and not everybody wants to just sell an ethylene plant. So projects come back, right, like Lyondell Flex 2, right, which is the metathesis unit they were looking at that could drive further spot ethylene reductions. How -- where is this on the list of concerns for Westlake as well as like opportunity sets.

So with the shuttering of these plants in North America that we shuttered in December, I've cut my ethylene -- my short position by 50%. Today, I'm -- before those actions were taken, we were buying 1.2 billion to 1.3 billion pounds of ethylene. Today I'm between 600 million and 700 million. When you think about the joint venture cracker we have with our partner in Lake Charles, Louisiana, the Lotte JV, that cracker is a 2 billion-pound cracker. We own 50% of that, and we actually operate the cracker. That has potential debottlenecking of 40% to 50%. So our share debottleneck 40% to 50% would be 400 million to 500 million pounds. So when you think about the ability to debottleneck and quickly fill 400 million to 500 million pounds, it pretty much balances this. It's just a matter of how do you decide and when do you decide to do that. The issue is we know what the shortfall position is. The question is, what's the capital cost to debottleneck. And what's the margin? And the answer is, when you think about the margin today, the cash margin for ethylene is $0.05, $0.04, not a wild margin. You want to spend how much capital do you want to spend to get $0.04 to $0.05 margin, probably not a lot today. So the reality is you want to take a look at the forward margin and say, what is that margin likely to be? What's the capital cost to spend to get that margin? So it really is asking ourselves, what's the dollar you want to spend to get the margin you could achieve. So it really is just doing that math and making that investment decision at some point in time. So we'll wait until we see the margins likely to widen out having done some of the engineering work, we know where the bottlenecks are, it's just a matter of choosing to then pull the trigger to make the investment to be able to balance ourselves.

That's helpful context. I'll end it there. We're out of time. So I appreciate the opportunity speaking with you.

Thank you very much for your interest.